A US executive order aimed at securing the country’s power grid from Chinese-made equipment could create greater disruption for battery energy storage supply chains than for transformers and switchgear, according to an analysis by Rystad Energy.
Executive Order 14421, signed by President Donald Trump on 26 August 2026, identifies substation transformers, grid-connected inverters, battery energy storage systems (BESS), high-voltage circuit breakers and power generation turbines as covered equipment. The order cites growing electricity demand from data centres and artificial intelligence (AI) infrastructure as a national security concern.
However, Rystad Energy’s analysis indicates that US dependence on Chinese transformers and inverters has already declined significantly, limiting the potential impact on these equipment categories. Battery storage remains more exposed, with China accounting for 50% of US lithium-ion battery imports by value in the 12 months to June 2026.
According to the consultancy, alternative suppliers currently lack the capacity to replace Chinese battery imports at a comparable scale, creating potential supply chain risks as demand for energy storage increases.
“The order is written around the grid, but the supply chain problem it creates falls most squarely on battery storage,” said Geoffrey Hebertson, Senior Analyst, Renewables and Power at Rystad Energy. He added that the battery storage sector had not yet completed the supply chain transition already seen in other equipment categories.
US Transformer and Circuit Breaker Imports Show Limited Chinese Exposure
The impact of the executive order on transformers and high-voltage circuit breakers could be limited because US import sources have already diversified.
China accounted for just 3% of US transformer imports and less than 1% of circuit breaker imports by value during the 12 months to June 2026. South Korea, Mexico and Canada collectively supplied 74% of circuit breaker imports and 48% of transformer imports.
South Korean manufacturers are also expanding their presence in the US market. Hyosung Heavy Industries disclosed US$285.3 billion in ultra-high-voltage transformer contracts with two US hyperscalers on 15 September, according to the analysis. The development highlights the role of South Korean suppliers and their US manufacturing facilities in meeting demand from large technology companies.
US inverter supply chains have also shifted away from China. Chinese inverter export values to the US declined 34% between 2022 and 2025, supported in part by the US Section 45X advanced manufacturing production credit, which has encouraged domestic inverter assembly.
US inverter manufacturing capacity is expected to reach 126 GW by 2028, further reducing reliance on imported equipment.
Battery Storage Faces Greater Supply Chain Risks
Battery energy storage presents a more significant challenge under the executive order. China accounted for half of US lithium-ion battery imports by value in the year to June 2026, while South Korea represented 15% and Japan 13%.
Rystad Energy noted that neither South Korea nor Japan currently has the capacity to independently replace the volume of Chinese battery imports that could be affected by the new restrictions.
The order also covers uninterruptible power supply systems used in critical infrastructure, potentially extending its reach to behind-the-meter battery systems that data centres use to maintain power reliability.
With AI infrastructure and data centre development increasing demand for dependable electricity supplies, restrictions affecting battery imports could complicate procurement and delay energy storage deployment.
December Rulemaking Could Determine the Extent of Restrictions
The next significant development is expected from the rulemaking process due by 24 December 2026. A key issue will be how the US Department of Energy defines ownership by a Covered Foreign Entity and whether the definition extends to manufacturers assembling equipment in countries such as South Korea and Mexico using Chinese-controlled components or capital.
If the rules adopt a broad definition, suppliers currently viewed as alternatives to Chinese manufacturers could also fall within the scope of the restrictions. This could affect multiple equipment categories and further constrain supply options for US energy and technology companies.
Rystad Energy warned that procurement teams at major technology companies should assess the potential implications before the rules are finalised.
The analysis concludes that although the executive order is intended to strengthen US grid security, its practical impact will depend on the final definitions and implementation requirements. Battery storage remains particularly vulnerable because of its continued dependence on Chinese imports and the limited availability of alternative supply at scale.
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